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Scathing TSC report slams ‘deeply flawed’ Barclays culture

Barclays’ board presided over "a deeply flawed culture" that enabled efforts by traders at the bank to rig the London interbank offered rate as far back as in 2005, the Treasury Select Committee has concluded in its 122-page report on the interest-rate fixing scandal.

The culture of Barclays had "gone badly awry", the TSC notes, saying that the lender "did not need a nod, a wink or any signal” from the Bank of England to “lower artificially” their Libor submissions as it was already doing so, even before the October 2008 crisis.

The influential committee of MPs also criticised the Financial Services Authority’s slow approach to probing the affair, urging the watchdog to “get away from box-ticking and endless data collection” and adopt a judgement-led approach to regulation wherein “more careful thought” is devoted “to where risk really lies”.

Noting that BoE officials - despite being well aware of the incentives for banks to post artificial borrowing rates during the 2008 financial crisis - failed to act on concerns that this was taking place, the TSC said that this “suggests a naivety” on the part of Threadneedle Street.

The House of Commons panel also criticised BoE governor Sir Mervyn King for intervening to force out Bob Diamond as Barclays' chief executive in the aftermath of the £290m fine imposed on the bank in June over the Libor rate-fixing scandal. King’s “involvement is difficult to justify", the report argued, saying that any effort to discuss Diamond's future as Barclays’ boss “should have come from the FSA and not the governor".

The TSC report also alleged that Diamond provided MPs with "highly selective" evidence in their inquiry into the Libor-fixing scandal, and also challenged some of the American-born financier’s claims about the bank's ties with regulators.

Reacting to the charges, Diamond said that he is “disappointed by, and strongly disagrees with”, several statements made by the TSC. Barclays was “aggressive” in its probe into the affair, and also “engaged in its cooperation with the appropriate authorities”, he argued.

Barclays said in a statement that it will “carefully consider” the TSC’s “comprehensive” report, and added that it appreciates the need for “change”, “not least to restore stakeholder trust”.

Meanwhile, ex-Barclays director Sir Nigel Rudd has hit out at the TSC for launching a “completely unacceptable” character assassination of Diamond, saying the panel had failed to offer adequate proof to back up its suggestion that Diamond misled MPs during his testimony about the Libor-fixing scandal.

Comment: As the TSC points out, many of the bank's non-executive directors - including David Booth, Fulvio Conti, Sir Andrew Likierman and Sir John Sunderland - were in post for substantial parts of the period in question when the alleged fixing of the key inter-bank lending rate took place.

Whatever the truth about Libor, one fact is clear: Barclays’ board needs new blood - and that includes ensuring that the new CEO comes from outside the existing management.